The sites to which steroid-receptors bind on the MMTV LTR are positioned on the surface of nucleosome B in a phased array of nucleosomes. Hormone activation of the MMTV promoter leads to modulation of nucleosome B structure in vivo which leads to a region of DNA hypersensitive to nucleolytic reagents. High-resolution analysis of the nucleosome position using PCR amplification indicates that the nucleosomes are positioned at base pair resolution, and that the hypersensitivity results not from nucleosome displacement, but from alteration in DNA structure across the nucleosome and into the A-B linker region. NFI, a component of the MMTV initiation complex is excluded from uninduced stable chromatin (see project Z01CPO4986-14), but binds to transiently introduced DNA. We find that hormone induction also leads to Hl depletion from the A-B region in stable chromatin, whereas the core histone complement of this region is unchanged. We also find that a disomic structure composed of the A and B nucleosomes can be reconstituted in vitro, with the octamer cores accurately positioned, and that NFI is excluded from this disomic structure. The glucocorticoid receptor, in contrast, can bind to the disome. Thus, two potential mechanisms exist for the exclusion of NF1, either (1) exclusion by nucleosome positioning; or (2) exclusion by a higher order, Hl-dependent, chromatin structure. Modulation of the structure is necessary during transcription activation to permit binding of the initiation complex. These results indicate that a chromatin template containing specifically positioned nucleosomes is an active participant in transcriptional activation, and that modulation of this template structure is one feature of steroid hormone action.